Filing Baseless Patent Infringement Complaints in the US Can be Expensive

Octane fitnessIcon Health and Fitness sued Octane Fitness for patent infringement in 2009, saying that Octane’s high-end elliptical machines infringed US Patent No. 6,019,710, which describes an elliptical machine that allows for adjustments to accommodate individual strides. After two years of litigation, a district court judge found that Octane’s machines didn’t infringe. Octane asked for an award of legal fees, but in 2011, a judge rejected the company’s bid. That decision was upheld on appeal.

It is very rare for US courts to rule costs. This has resulted in the so-called patent troll phenomenon, wherein companies sue for patent infringement on very shaky grounds assuming that they have little to lose.

In this instance, Octane Fitness appealed to the Supreme Court, which heard oral arguments on the case in 2014. In 9-0 vote, the court issued an opinion (PDF) making it much easier to get attorney’s fees. Justice Sonia Sotomayor wrote the opinion, holding that patent laws call for awarding fees in an “exceptional” case, which is “simply one that stands out from others with respect to the substantive strength of a party’s litigating position… or the unreasonable manner in which the case was litigated.”

With that, the case was kicked back down to the lower courts. Under the new standard, the district court judge awarded $1.6 million to Octane over the objections of Icon lawyers.

On Friday, the US Court of Appeals for the Federal Circuit upheld (PDF) that award in its entirety. The district court found that Icon’s claim construction arguments were “wholly at odds with the patent text, prosecution history, and inventor testimony,” The court also found that Icon included Nellie’s Fitness, an equipment distributor, as a defendant for the purpose increasing Octane’s legal costs.

The appeals judges found “no clear error in its analysis” and upheld the district court’s award. The panel dismissed a cross-appeal by Octane asking for a larger award, which would also cover litigation over the fees.

COMMENT

trollThe case is reminiscent of a frivolous law suit brought by Pearl Cohen on behalf of Vagabond Source, where the courts ruled that Source’s counsel (i.e. Pearl Cohen Zedek Latzer pay $187,308.65 in partial attorney’s fees, but that Source not be sanctioned. Pearl Cohen appealed that ruling, and lost again in the Federal Circuit Court of Appeals.

We think that such cost rulings are in order to prevent abuse of the system.

 

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